The Bit Short: Inside Crypto’s Doomsday Machine

Re:The Bit Short: Inside Crypto’s Doomsday Machine by skybrian on Saturday January 16, 2021 @09:37PM (#25807563)

I think what you're missing is that many people are not paying market price for housing, because they bought their houses a long time ago. If they have mortgages, they were set by the home price when they bought.

CPI is an average. The people who have owned their own homes for years are dragging down the average for the cost of living. You can't get the cost of living that they have if you buy today.

Averages can mislead. It's like the old joke about average income in a room when Bill Gates is in the room.

By changing who is included in the average, it might be possible to construct a CPI that's more relevant to you?

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Re:The Bit Short: Inside Crypto’s Doomsday Machine by perl4ever on Sunday January 17, 2021 @03:10AM (#25809092)

If homebuyers are irrationally paying significantly more than it would cost to rent the same house, then that doesn't seem to me like a valid reason to inflate the indexes.

If homebuyers push prices of housing up and that does increase rents, then it is a valid reason to adjust CPI upward, and they do, AFAIK.

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Re:The Bit Short: Inside Crypto’s Doomsday Machine by skybrian on Sunday January 17, 2021 @03:48PM (#25814804)

What I'm saying is that many home owners are paying significantly less than it would take to rent the same house, because they bought decades ago.

Though of course there are also those who bought at high prices too.

If you want to know about rents, it would make sense to just look at rents. I wonder how the housing component of CPI would look if there were a survey that was limited to renters?

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Re:The Bit Short: Inside Crypto’s Doomsday Machine by perl4ever on Sunday January 17, 2021 @04:25PM (#25815122)

My understanding is that the index relies on estimates of what homeowners would pay in rent for equivalent housing.

If you think longtime homeowners are paying less, then substituting equivalent rent should push the CPI rate of inflation to be higher than the genuine rate. An overestimate.

So you think correctly calculated inflation is less than the CPI says?

I thought everybody who thinks it is inaccurate thinks it is an underestimate, that the government is covering up inflation being rather high.

Also, if they just didn't survey non-renters, then the result would not include how much homeowners spend on, say, hamburgers or whatever.

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Re:The Bit Short: Inside Crypto’s Doomsday Machine by skybrian on Monday January 18, 2021 @12:19AM (#25818438)

Hmmm, it looks like they just ask people what they think it would rent for and use that number:

"If someone were to rent your home today, how much do you think it would rent for monthly, unfurnished and without utilities?” [1]

So, I was wrong about this. I'm wondering how people might be biased, though? They could over- or under-estimate what their property would go for.

[1] https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...

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